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Yannick Bineau
 
''Real exchange rate and bilateral trade balance of Cambodia: A panel investigation''
( 2016, Vol. 36 No.2 )
 
 
This article investigates the relationship between Cambodia's bilateral trade balance and its fundamental determinants: the real exchange rate and real income differentials between Cambodia and its foreign trading partners. The Panel Fully Modified Ordinary Least Squares method is applied to a sample of 10 trading partners for the 1998–2014 period on a quarterly basis. The main findings suggest that a devaluation of the real exchange rate significantly improves bilateral trade balance. However, it is not possible to prove that any modification of the real exchange rate will cause a trade balance adjustment that follows the standard J-curve shape, although two of the 10 sampled countries are exceptions. The model also shows that higher foreign partner real incomes relative to domestic real income levels cause a significant inverse change in bilateral trade balance for five of the sampled countries, suggesting that Cambodia is highly dependent on imports.
 
 
Keywords: Trade balance, real exchange rate, Cambodia, FMOLS, J-curve, growth.
JEL: F3 - International Finance: General
C3 - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
 
Manuscript Received : Jan 22 2016 Manuscript Accepted : May 18 2016

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